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2022 (10) TMI 845 - AT - Income TaxInvocation of Reassessment Proceedings - assessee has shown unaccounted purchases and claimed depreciation on plant and machinery, which were found to be bogus - HELD THAT:- If there is relevant material on the basis of which reasonable person can form a requisite belief that income chargeable to tax has escaped assessment, then proceedings under section 147 of the Act can be validly initiated. Further, it is also well settled that sufficiency or correctness of the material is not a thing to be considered at the stage of recording of reasons. From the reasons recorded for reopening the assessment in the case of assessee it is also evident that the assessee has not disclosed truly and fully all material facts. As a result, we find no infirmity in the reassessment proceedings initiated by the AO under section 147 of the Act. Thus, the grounds raised by the assessee pertaining to this issue are dismissed. Notice u/s 143(2) was not served within the prescribed period - As per section 143(2) of the Act, notice under this section is required to be served on the assessee before the expiry of 6 months from the end of the financial year in which the return under section 139 or in response to notice under section 142(1) of the Act is furnished. Thus, the time period provided in the aforesaid section for issuance of notice is in respect of return filed under section 139 or in response to notice under section 142 (1) of the Act. However, in the present case, reassessment proceedings were initiated by the AO under section 147 and notice under section 143(2) was issued only pursuant there to. Thus, in view of the above, in absence of any other material available on record we are of the considered view that notice u/s 143(2) of the Act was served to the assessee within the prescribed time pursuant to initiation of reassessment proceedings in the present case. Thus, the ground raised by the assessee pertaining to this issue is dismissed. Addition on account of alleged purchases out of books - We find that details/books of accounts were not produced by the assessee despite various opportunities - the assessee though claimed that all his record/books of accounts were destroyed in the fire, however, neither produced the parties from whom it has made the purchases nor filed any documentary evidence to justify its claim that purchases as shown in profit and loss account are the only purchases made by the assessee. Further, there is nothing available on record to dispute the adoption of enhanced GP rate @8% for assessment year 2009–10. Thus, in view of the above, in absence of any material to support the claim of the assessee, we find no infirmity in the impugned order passed by the CIT(A) on this issue. As a result, addition made by the AO on this issue is upheld. Thus, the ground raised by the assessee pertaining to this issue is dismissed. Disallowance of depreciation on account of bogus purchases of plant and machinery - We find that regarding the process of verification, the valuers had submitted that machines were looking very old. Further the metallic plate on the machines which contains all the technical details of the particular machines i.e. machines serial No., model No., year of manufacturing, electrical ratings, operating diagram, make and various details of the machinery was missing. The valuers further submitted that there was no basis to ascertain the model and the year of manufacture and the year of installation of the machines. Further, the valuers submitted that ownership of the machines cannot be verified in absence of invoices and fixed assets register. In absence of details as sought by the lower authorities, the bills produced by the assessee were found to be bogus. Thus, in view of the above findings, we find no infirmity in the impugned order passed by the learned CIT(A) on this issue. As a result, addition made by the AO on this issue is upheld. Thus, the ground raised by the assessee pertaining to this issue is dismissed. Disallowance of payment of interest expenses - Since, borrowed funds have been siphoned off the interest claimed by the assessee was disallowed by the AO. CIT(A) also dismissed the appeal filed by the assessee as held since borrowed funds have been siphoned off, the interest claimed on the same cannot be considered as used for business. The disallowance is warranted. The computation made by the assessing officer is fair and reasonable.As, findings of learned CIT(A) in respect of bogus purchases have been upheld, we find no infirmity in the aforesaid findings of learned CIT(A) on this issue. Thus, the ground raised by the assessee pertaining to this issue is dismissed. Ad hoc disallowance of administrative expenses - We find that the assessee did not produce any details/evidence in support of its claim of admission to expenses. In absence of the details, the AO disallowed 10% of administrative expenses by the assessee and added the same to total income. During the appellate proceedings before the learned CIT(A), assessee submitted that administrative expenses constitute only minuscule portion of the total turnover. We find that apart from the aforesaid submission nothing has been brought on record to prove that the administrative expenses as claimed was incurred for purpose of business. Thus, in view of the above, we find no infirmity in the impugned order passed by the learned CIT(A) upholding the disallowance of 10% of administrative expenses claimed by the assessee. Thus, the ground raised by the assessee pertaining to this issue is dismissed. Levy of interest under section 234A - We deem it appropriate to remand this aspect to the file of AO for de novo adjudication after necessary examination of the fact whether the return of income was filed by the assessee within the prescribed time under the Act. While, interest levied under section 234B and 234C of the Act are consequential in nature. Accordingly, same is allowed for statistical purpose.
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